Revolutionizing the Way Tesla Motors Inc. Goes To
Market
Redefining Tesla’s Strategy and Aligning their Business
Model to Support Continued Growth
Team Six
Rob Collins
Anu Ganguly
Joel Garcia
Michael Muldoon
Jim Sawyer
Dave Wildman
Agenda
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Current State Tesla
Reasons for Change
Redefining the Organization Structure
Strategy & Focus: Tesla Motors Group
Strategy & Focus: Tesla Energy Group
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Current State of Tesla
It’s not all Roses in Shallow Alto…Can I get a Check Please?
Company Description:
Share Price Performance Since IPO:
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Founded in 2003
Approximately 6,000 employees
Over 100 retail locations
Initial Public Offering: June 2010
Operates in the Automotive and Energy Storage
segments
 Market cap: $25bn
 Enterprise value: $27bn
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
EBITDA Performance:
Revenue Growth:
$16,000
$14,111
$1,887
$2,000
$14,000
$12,000
$10,830
$10,000
$8,557
$8,000
$6,000
$3,198
$4,000
$2,000
$4,046
$2,014
$117 $204
$413
2010
2012
$1,500
$1,321
$1,000
$840
$500
$0
($235)
$45
($136)
($366)
$45
($345)
$0
2011
2013
2014
2015 2016E 2017E 2018E
($500)
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E
2
Source: Tesla Motors company filings and CapitaIQ
Reasons for Change
A SWOT Analysis Leaves Much to be Desired
Strengths
Eco Friendly
Luxury
 Pollution free and utilize a low cost fuel source (electricity)
 Luxury vehicle with futuristic and elegant design
What is Tesla?  A car company? Energy company?
Weaknesses
Opportunities
Threats
 Tesla is a means to an end – Musk wants the company to
Unclear Vision
revolutionize the move away from fossil fuels
 Not driven by profitability
Battery
Technology
 Limited energy storage capacity and mileage
 Today’s consumers are all about convenience and infinite supply
Competition
 Many large auto makers have at least one hybrid or electric vehicle
 Often, these green vehicles are simply for political or social benefit in
order to drive additional profit through gas guzzlers
Low Gas
Prices
 If gas prices remain low, demand for electric cars may not be as
forecasted
Price Point
 Tesla cars are expensive!
 Even at a $35K price point, while more affordable, lots of competition
at that price point
New
Technology
 Tesla is already at risk of obsolete technology
 Driverless cars are the future
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Redefining the Organization Structure
The “What is Tesla” Mystery Finally Solved
Tesla envisions itself as an energy innovation company. However, in its current form, it is identified as
a car company. What is Tesla? We propose splitting Tesla into two distinct operating segments…
Tesla Holdings Co.
M O T O R S
E N E R G Y
Tesla Motors Group
(TMG)
Tesla Energy Group
(TEG)
 TMG focused exclusively on automobile
design and manufacturing (Core
Business)
 TEG focused exclusively on developing
battery and other technology for use in
TMG autos and utilities (R&D,
Thinktank, Incubator Model)
This reorganization is very similar to the way Google has transitioned to its
“Alphabet” model
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Strategy & Focus: Tesla Motors Group
A Willing Partner Desperate for Brand Enhancement
Increased sales volumes and
expansion opportunities
Tesla’s powertrain
and battery technology
Volvo’s global reach,
particularly Europe and
Asia
Tesla’s brand cachet and
premium market status
Volvo’s higher capacity and
economies of scale
manufacturing capabilities
Access to Tesla’s early
adopter demographic
Volvo’s powered by Tesla’s powertrain | Tesla powered by Volvo’s global market capacity
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M O T O R S
Strategy & Focus: Tesla Motors Group
Why Volvo? Just Ask Your Parents
When you think of Volvo. You think
 Safety
 Quality
 Luxury?
 When it’s powered by Tesla, you’ll see
this..
Gaining Market Access
 Volvo, now owned by Geely, a $23Bn
Chinese automaker, that brings the
Asian market to Tesla, along with
Volvo’s existing European market
Thousands
Source: volvocars.com/us/cars/concept-cars/concept-coupe
600
500
400
300
200
100
0
Global Unit Sales 000’s
465
50
18
2014
503
Tesla
Volvo
2015
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M O T O R S
Strategy & Focus: Tesla Motors Group
No Range? No Problem
Tesla enters a strategic partnership with Starbucks to put charging stations at Starbucks locations
around the US
Benefits to Partnership:
Tesla
 Brand recognition and enhance luxury status
 Marketing benefit as brand becomes more
visible across the country
Tesla: ~500 Charging Stations
Worldwide
Source: CNN.com
Starbucks
 Generate additional foot traffic at select
locations
 Maintain mature branding with Tesla target
market – 18-44 yrs: 33.2%, 45-64 yrs: 50.6%
 Expand “eco” friendly image
Starbucks: 11,563 US Stores
Source: Starbucks.com, Edmunds.com
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M O T O R S
Strategy & Focus: Tesla Energy Group
Musk’s Manor is Coming to a City Near You
Introduction of the Gigafactory
 ~$5 billion investment
 Construction started 2014
 Planned annual production capacity: 35 GWh
 Production set to begin in 2017 with a goal of
reducing battery cost by ~30% through
economies of scale
2020 Production Exceeds 2013 Global Output
 By lowering the cost of the battery, Tesla will be
able to sell a Tesla Motors automobile for
$35,000; low enough to compete with ICE
automobiles
 Enters new markets: Utilities, Residential,
Businesses with energy storage
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E N E R G Y
Strategy & Focus: Tesla Energy Group
It’s Time for Some Skin in the Game
Current Strategy  Supply Agreement
Proposed Strategy  Joint Venture
Battery Cell
Cash
 $2bn investment
in Gigafactory
 $1.6bn investment
in Gigafactory
60% Equity
40% Equity
Tesla-Panasonic Joint Venture
 Funds production
equipment for
battery assembly
 Funds production
equipment to
produce lithiumion battery cells
 Purchase battery
cells at negotiated  Produce battery
prices
cells for Tesla
Inherently creates an internal conflict:
Panasonic also a competitor to Tesla
 JV aligns Tesla and Panasonic to the same
strategy (shared revenue and costs)
 JV allows Tesla to enter new energy
storage markets with utilities
 Reduces competition – competitors
compete primarily on price
 Focus on R&D: Develop incubator model
to design and produce NextGen battery
technology (“bet” of “Alphabet”)
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E N E R G Y
Pro and Con of the Restructuring
We Get it, It’s Good…but Humor us With a Slice of Humble Pie
There are many PROs and CONs to the proposed structure
PRO
CON
 Clear Delineation of skills and exclusive focus
on core business units
 Increased expectation of financial
performance from investment community
 Improved access to capital through
enhanced investor transparency
 Success reliant on continued innovation in
battery technology and energy generation
 Cost savings (beyond the 30% expected from
the Gigafactory) and technology produced by
the redefined Tesla/Panasonic relationship
 Tesla auto sales not continuing to gain
market share
 Volvo partnership enables reduced
competition and manufacturing economies
of scale
 Decision of mainstream auto
manufacturers seriously entering the
electric vehicle market
 Mitigate potential switching cost issues by
deepening partnership with Panasonic
 Battery related environmental concerns
 Potential culture conflict with Panasonic
 Control the production cycle to ensure
deliveries keep up with demand
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Any Questions?
Just Remember You’re Next…
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Appendix
Strategy & Focus: Tesla Motors Group
Admitting There’s a Problem…
Excerpt from Tesla’s 2013 10K:
“Most of our current and potential competitors have significantly greater financial,
technical, manufacturing, marketing and other resources than we do and may be
able to devote greater resources to the design, development, manufacturing,
distribution, promotion, sale and support of their products. Virtually all of our
competitors have more extensive customer bases and broader customer and
industry relationships than we do. In addition, almost all of these companies have
longer operating histories and greater name recognition than we do. Our
competitors may be in a stronger position to respond quickly to new technologies and
may be able to design, develop, market and sell their products more effectively. We
believe our exclusive focus on electric vehicles and electric vehicle components, as
well as our history of vehicle development and production, are the basis on which
we can compete in the global automotive market in spite of the challenges posed by
our competition; however, we have a limited history of operations.”
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M O T O R S
Strategy & Focus: Tesla Energy Group
The Old Way Just Won’t do
Managing Excess Demand:
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E N E R G Y
Strategy & Focus: Tesla Energy Group
Tesla Energy Overview and Product Portfolio
The world currently consumes 20 trillion kWh
of energy annually
Launched: 2015
Tesla Energy’s goal is to move the electricity
grid off of fossil fuels and towards renewable
energy sources
Tesla Energy offers a suite of battery products
globally:
• Homes
• Businesses
• Utilities
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E N E R G Y